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By Sara Hansard
The Department of Health and Human Services Feb. 24 outlined the approach it plans to propose to define actuarial value for individual and small group health plans.
In addition, it outlined its plans for cost-sharing requirements that insurers will have to follow for benefits that must be covered for moderate-income people buying policies through insurance exchanges.
The guidance bulletin posted on the Center for Consumer Information and Insurance Oversight website asks for public comments without specifying a date. A draft actuarial value and cost-sharing reductions bulletin has been pending approval at the Office of Management and Budget since Jan. 26, but it was not clear if the Feb. 24 bulletin was the same.
The definition of actuarial value, a measure of the percentage of expected health care costs a health plan will cover, would apply to nongrandfathered individual and small group plans that took effect after the Patient Protection and Affordable Care Act was enacted in 2010, the Feb. 24 bulletin said. Actuarial value is calculated based on cost-sharing provisions for benefits, HHS said in the bulletin.
Under PPACA, insurers must reduce cost sharing for “essential health benefits” for people with household income below 400 percent of the federal poverty level who are enrolled in “qualified health plans” (QHPs) in health insurance exchanges to be created in 2014 under the law, HHS said. The cost-sharing reductions “are designed to have the effect of achieving certain [actuarial values] and therefore follow the same definitions and calculation,” HHS said.
Actuarial value “is expected to be used by consumers to compare QHPs and non-grandfathered individual and small group market plans with different cost-sharing designs and as a method for consumers to understand relative plan value,” HHS said in the bulletin.
The options proposed by CCIIO for calculating actuarial value, which include standardized data and a publicly available actuarial value calculator, “aim to produce comparisons across plans within a state that focus on cost-sharing differences rather than other differences between plans, such as different provider payment rates and utilization patterns,” Cori Uccello, senior health fellow with the American Academy of Actuaries, told Bloomberg BNA in an e-mail.
PPACA requires insurers offering nongrandfathered individual and small group health plans inside and outside of the exchanges to meet specified levels of coverage, called “metal tiers,” labeled bronze, silver, gold, and platinum. Bronze plans must cover 60 percent of actuarial value, silver plans 70 percent, gold plans 80 percent, and platinum plans 90 percent, based on the essential health benefits that must be covered under the law, HHS said.
“We intend to propose that issuers would be able to input into the [actuarial value] calculator a limited set of information on the benefits offered in a plan and this information would be sufficient to product the [actuarial value] of the plan,” HHS said.
A “handful” of cost-sharing features would have a large impact on actuarial value, including deductibles, coinsurance, maximum out-of-pocket costs, and to a lesser extent cost-sharing for emergency room visits, inpatient admissions, and diagnostic imaging, the bulletin said.
“However, because the vast majority of medical costs are dedicated to physician and mid-level practitioner care; hospital and emergency room services; pharmacy benefits; and laboratory and imaging services, not all cost-sharing information will have a material impact” on actuarial value, HHS said.
Because only a small percentage of inpatient costs come from out-of-network expenses, HHS intends to propose that the calculator consider only the value of in-network service use, the bulletin said.
Although the bulletin said the innovative plan design features, such as value-based insurance designs that vary copayments for services based on expected value, are “meaningful to consumers,” there is a “limit on the number of features that can be recognized for incorporation in a practical and easy-to-use [actuarial value] calculator.” HHS asked for comment on which benefits and services should be included in the calculator.
The bulletin said HHS intends to require health care providers to collect from individuals eligible for cost-sharing reductions only the amount specified in silver plans. The federal government would pay issuers monthly advance amounts estimated to cover the cost-sharing reductions, the bulletin said.
It also included initial reductions in the maximum out-of-pocket expenses people with incomes below 400 percent of the poverty level would pay for silver-tier individual and small group plans in the exchanges. The reductions focused primarily on individuals with household income no greater than 250 percent of the poverty level.
The Actuarial Value and Cost-Sharing Reductions Bulletin is available in HealthDocs™.
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